The Starters Guide To Understanding ETFS and Stocks

Unless you’re a day trader or you have the capital to see your investments fluctuate, the stock market can seem like a scary place. Truth is, investing in the stock market has historically been one of the best ways for your money to grow and is something almost every investor should consider.

Now, if you’ve been keeping up with the news lately, you know that stocks are on a bit of a roller coaster ride right now. There are many people out there who have lost faith in stocks as an investment vehicle and have moved their money into other things like real estate or even cash.

The thing is, some of those people may not be seeing the forest for the trees – and that’s what we’re here to explain.

If you’re just getting started with stocks and ETFs, you might be a little confused about everything. Don’t worry! It happens to the best of us. That’s why we put together this helpful starter guide to understanding ETFs and stocks.

What Is An ETF?

Exchange-traded funds (ETFs) are a great option for investors who want to diversify their holdings and get exposure to a wide variety of stocks or commodities like gold or silver.

An ETF is basically a basket of stocks or a combination of stocks and other assets that’s been wrapped up into one fund. It’s easy to buy and sell ETFs just like you would any other stock. When you buy an ETF, you’re basically buying a piece of the whole fund which makes it a kind of hybrid approach between investing in a company directly and owning the stock in the company.

What Are Stocks?

Stocks are shares in a company you’re investing in. They are also referred to as equities. When you purchase stocks, you are a part owner of the company and entitled to a portion of the company’s profits.

But you also assume some risk: If the company runs into financial trouble, you could lose money. But with great risk comes great reward. If the company succeeds and grows, so do the stocks (though, of course, there is no guarantee).

For example, if you bought $1,000 worth of shares in Apple in 2000, those shares would be about $173,727 today. Crazy margins, right?

So, What’s The Difference Between An ETF And A Stock?

Unlike ETFs, stocks are a direct ownership in a company. You buy shares in a company and you own shares in that company. When you purchase a stock, you own a portion of the company. The value of your investment will rise and fall based on how well the company is doing and the overall economy.

Stocks are more risky than ETFs because you are dealing with individual companies. If the company you invested in goes out of business, you lose your entire investment. However, ETFs are made up of a basket of many companies. If one company in the basket has issues, you don’t lose anything from the other companies.

Final Words: How To Buy Stocks And ETFs

There are a few steps to buying stocks or ETFs to consider. First, you’ll need to choose the stocks or ETFs you want to invest in. Businesses or industries that interest you are great places to start your research. You can also consider how the stocks or ETFs have performed in the past.

When you’ve decided what you want to invest in, you’ll need to open a brokerage account. A brokerage account is a type of account that allows you to buy stocks, ETFs, and other investments online or in person at a financial institution. You’ll also need to decide how much you’re going to contribute to your investments each month.

With that said, investing in the stock market has historically been one of the best ways for your money to grow and is something almost every investor should consider.

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